Providing services to EU and VAT obligations

There have been multiple changes to laws since the beginning of the new year. For example, the government has introduced a new term “Identified entity” and has revoked the old term “Tax Identified entity”.

Until 31.12.2012:

Those, who provide and deliver services to a tax paying entity in other EU countries, automatically became VAT payers.

So for example, if you placed a Google AdSense advertisement on your website, you automatically became a VAT payer because Google’s local headquarters were located in Ireland. As a result, you were providing services to other EU country and had to register with the tax authority within the next 15 days.

This has resulted in a quiet absurd situation where providing services from Czech Republic to Slovakia was more difficult than providing services to Ethiopia. All of this was due to the fact that EU regulated the trade and VAT among its member countries.

From now on:

From 1.1.2013 a new VAT law has come into effect that simplifies the situation by introducing the concept of “Identified entity”. Compared to normal VAT payers, Identified entity has only few obligations. Entities, which provide or receive services in other EU countries, do not have to register as the normal VAT payers. Furthermore, Identified entities are also not obliged to apply VAT and are not eligible for tax deductions. However, they are must declare VAT upon receiving goods or services from other EU country and must submit a comprehensive report upon providing and delivering goods and services to other EU countries.

To make things easier for you, you can choose in your Profile Setting whether you are a: